Amicus Curiae Brief — At&t Corp. v. Allen Et Ux., on Behalf of Themselves and All Others Similarly Situated

Supreme Cour, U.S.

FILED

(&) MAR 24 2004

OFFICE OF THE CLERK

No. 03-1046

IN THE

Supreme Court of the Anited States

AT&T CorpP.,

Petitioner,

V.

BOBBY GENE ALLEN, ET AL.,

Respondent,

On Petition for Writ of Certiorari to the

Oklahoma Court of Civil Appeals

BRIEF AMICUS CURIAE OF MULTISTATE TAX

COMMISSION IN SUPPORT OF PETITIONER

Frank D. Katz, General Counsel

Counsel of Record

MULTISTATE TAX COMMISSION

444 No. Capitol Street, N.W. #425

Washington, D.C. 20001

(202) 624-8699

March 24, 2004

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ciscccssccsccesccscsscccosossensdersavssensssenscenes ll

INTEREST OF AMICUS CURIAE ..............c.ssscssossssescsencesseess

DINE vscccecsssccsinsciessneresveinnisnsabtsvatensnaiunacvesabionssnnieavcbeanine 2

I. IN CERTIFYING THE PLAINTIFF CLASS, THE

OKLAHOMA COURT VIOLATED THE DUE

PROCESS AND FULL FAITH AND CREDIT

CLAUSES BY OVERRIDING THE SOVEREIGN

IMMUNITY OF SISTER STATES THAT BAR

TAX REFUND SUITS UNLESS THEIR ADMIN-

ISTRATIVE REMEDIES ARE EXHAUSTED............. b

A. Choice of Law Rules under the Due Process and

Full Faith and Credit Clauses Require

Oklahoma to follow the Law of the State of

Nonresident Plaintiffs in Determining Juris-

diction for Purposes of Class Certification............. 3

B. Assertions of State Sovereign Immunity to Bar

Taxpayers from Suing Vendors Regarding Tax

Collections or from Bringing Court Actions for

Tax Refunds Prior to Exhausting Administrative

Remedies is Vital to Protect State Tax Policy......... 5

II. THIS COURT HAS JURISDICTION UNDER THE

EXCEPTIONS TO FINALITY IN COX BROAD-

CASTING CO. V. COHN, 420 U.S. 469 (1988),

AND STANDARDS FOR APPEAL OF CLASS

CERTIFICATION DECISIONS DEVELOPED

ey ea Le ao ae a S| ; One ene eee 8

CATS svceseconnvncssisiianissanpisnesnininenestomesimnsstaeniaenbaeniesntehe 15

ii

TABLE OF AUTHORITIES

Page

Cases:

Abney v. United States, 431 U.S. 651 (1977) ............e 14 .

Allstate Ins. Co. v. Hague, 449 U.S. 302 (1981) .............. 4

Amchem Products, Inc. v. Windsor,

FE a OE TD icreccieonitaitivuiaroiaaaianiana 11,12, 14

Blair v. Equifax Check Services, Inc.,

tM’ Co W)...k ck 12, 13

Castano v. American Tobacco Co., 84 F.3d 734

re: PR ihe hnccnuockcucaramen eam 12

Construction Laborers v. Curry,

PFE i RE EE tiiccsce nnn oan 10, 11

Cox Broadcasting Co. v. Cohn, 420 U.S. 469

Err Fit vicsaisandaciinsniciiasndasdementsaiaineiienn sana agae 8,9, 10, 11

Franchise Tax Board of California v. Hyatt,

DIO Ue BES GODS) secssiccrnesisinevenin iicinelaanhiaicaeainiial 4,5

Helstoski v. Meanor, 442 U.S. 500 (1979) .........cceceseeees 14

In re Lorazepam & Clorazepate Antitrust Litigation,

OP Fie Pe OP. CA. DE eetisshencscnesiacinsaannin 12, 13, 14

- Lienhart v. Dryvit Systems, Inc.,

255 FS EIR EC, TOO os sssssecscoentccseccctersione 12,14

Mercantile National Bank v. Langdeau,

PER Wake GP Ll NE veanvihinsniadinmatiiamacioiaaal 11

Mills v. Alabama, 384 U.S. 214 (1966) .......ccceceesseeeseeeeee 9

National Private Truck Council, Inc, v. Oklahoma Tax

Commission, 515 U.S. SEZ (1995S) .<cccccsinccasaressensonatnoson 10

iii

Newton v. Merrill Lynch, Pierce, Fenner & Smith,

Ns gal | 12, 14

Phillips Petroleum Co. v. Shutts,

I Oe SED scans cniisanensntseeeoneseubsonnienions 4,5, 10, 14

P.J.’s Concrete Pumping Service v. Nextel West,

No. 2-02-1219 (Ill. Ct. App. 2™ Div.,

celia cnpticrcntiachidapavenestvesssnissesdenesunsesnense 15

Prado-Steiman v. Bush, 221 F.3d 1266

I PN i csncseswsesosecencsivvnannscnveneseves 12, 13, 14

Sun Oil Co. v. Wortman, 486 U.S. 717 (1988)......... 4,5,7

United States Steel Corp. v. Multistate Tax Comm’n,

I TUE SETI cnchanissdsussonnainedsesineakassenrenserenseonssncnse l

Walsh v. Ford Motor Co., 807 F.2d 1000

aati csiccos cli ceitalisébenesieninnenesenenentoess 12

Waste Management Holdings, Inc. v. Mowbray,

OE, BD on cccssesesoseceoessesesesersssennesense 12

Statutes and Legislative Material:

TIT Uscirialts ihe dicisieendadatinbomaneincoesnenipevansneenssonees 8

GM, We MUR vascscncecsennsssunensossesssonsenencess 8, 12, 13

MULTISTATE TAX COMPACT, RIA ALL STATES TAX

GUIDE 4 701 ef seg., p. 657 (2001) ............ecccssseesrseseees ]

Pee Rn Fd, FF EAE. DIS CLISP) cssccescccosccscccsesescsveveess ]

TAX INJUNCTION ACT (28 U.S.C. 1341)... cceeeeeeeeeeees 10

1

BRIEF AMICUS CURIAE OF MULTISTATE TAX

COMMISSION IN SUPPORT OF PETITIONER’

INTEREST OF AMICUS CURIAE

The Multistate Tax Commission is the administrative

agency of the MULTISTATE TAX COMPACT. See RIA ALL

STATES TAX GUIDE 701 ef seq., p. 657 (2001). Twenty-one

States have legislatively established full membership in the

COMPACT. In addition, five States are sovereignty members

and sixteen States are associate members.” The Court upheld

the validity of the COMPACT in United States Steel Corp. v.

Multistate Tax Commission, 434 U.S. 452 (1978).

Historically, the COMPACT evolved out of concern of the

States and multistate taxpayers about proposed federal legis-

lation to regulate state tax systems.° The States’ initial inter-

est in forming the COMPACT was to safeguard state taxing

power in the context of multistate commerce, an essential

' No counsel for any party authored this brief in whole or in part.

Only Amicus Multistate Tax Commission and its members States through

the payment of their membership fees made any monetary contribution to

the preparation or submission of this brief. This brief is filed by the

Commission, not on behalf of any particular member state. Finally, this

brief is filed pursuant to the consent of the parties, filed herewith.

* The COMPACT parties are Alabama, Alaska, Arkansas, California,

Colorado, District of Columbia, Hawaii, Idaho, Kansas, Maine, Michi-

gan, Minnesota, Missouri, Montana, New Mexico, North Dakota, Ore-

gon, South Dakota, Texas, Utah and Washington. The Sovereignty mem-

bers are Florida, Kentucky, Louisiana, New Jersey and Wyoming. The

« Associate members are Arizona, Connecticut, Georgia, Illinois, Mary-

land, Massachusetts, Mississippi, New Hampshire, North Carolina, Ohio,

Oklahoma, Pennsylvania, South Carolina, Tennessee, West Virginia and

Wisconsin.

*The Willis Committee, sanctioned by Part II of PuB. L. 86-272, 73

STAT. 555, 556 (1959), extensively studied how Congress might regulate

State taxation of interstate commerce.

Pe > eee

2

governmental power for States to fulfill their constitutional

role. To this end, the Commission reviews state court deci-

sions that impact state tax sovereignty to determine whether a

given decision can have a perverse affect. The Oklahoma

Court of Civil Appeals has issued such a decision, directly

denying the sovereign interests of sister States.

The right of a State to require the exhaustion of adminis-

trative remedies as a condition to a waiver of its sovereign

immunity from tax refunds suits in courts of general jurisdic-

tion is a foundational aspect of state tax sovereignty. In addi-

tion, to enhance the efficient functioning of state tax systerns,

States have chosen to provide vendors—burdened with the

obligation of collecting the government’s tax—statutory pro-

tection from refund suits by the taxpayer-consumer. Tax sys-

tems work best when agencies can gain willing cooperation

from those responsible to collect and pay over the tax. Pro-

tecting vendors from suits enhances that cooperation. More-

over, permitting tax disputes to be litigated in court actions

between vendors and customers without participation of the

tax agency defeats the purpose of establishing special tax

administration procedures. The decision below impairs these

legitimate State tax policies.

Oklahoma’s certification of a class that includes nonresi-

dents from States that forbid a court action of this kind raises

issues of vital importance to States, and yet no State is party

to the action. Your amicus represents the interest of States in

asserting their tax sovereignty rights. Of the 27 other States

affected by the class certification of the Oklahoma court, ten

are full compact member States, three are sovereignty mem-

ber States and ten are associate member States.

3

ARGUMENT

I

IN CERTIFYING THE PLAINTIFF CLASS, THE

OKLAHOMA COURT VIOLATED THE DUE

PROCESS AND FULL FAITH AND CREDIT

CLAUSES BY OVERRIDING THE SOVEREIGN

IMMUNITY OF SISTER STATES THAT BAR

TAX REFUND SUITS UNLESS THEIR ADMIN-

ISTRATIVE REMEDIES ARE EXHAUSTED

A. Choice of Law Rules under the Due Process and

Full Faith and Credit Clauses Require Okla-

homa to follow the Law of the State of Nonresi-

dent Plaintiffs in Determining Jurisdiction for

Purposes of Class Certification.

The Oklahoma trial court certified a plaintiff class that

includes AT&T customers who lived outside city limits in 28

States but were charged municipal taxes. The court applied

Oklahoma law to all plaintiffs, heedless of the fact that many

nonresident plaintiffs with no contact with Oklahoma live in

States that have asserted their statutory sovereign immunity

to bar such suits.

Recent Supreme Court choice-of-law jurisprudence de-

scribes the constitutional limits on a forum’s choice to apply

its own law.

[T]he Due Process Clause and the Full Faith

and Credit Clause provided modest restrictions on

the application of forum law. These restrictions

required “that for a State's substantive law to be

selected in a constitutionally permissible manner,

that State must have a significant contact or sig-

nificant aggregation of contacts, creating state in-

4

terests, such that choice of its law is neither arbi-

trary nor fundamentally unfair.”

Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 818 (1985),

quoting Allstate Ins. Co. v. Hague, 449 U.S. 302, 312 (1981).

Shutts was a Kansas class action involving residents of all

50 States seeking interest on delayed royalty payments from

natural gas production in Kansas and 10 other States. Only a

small percentage of the plaintiffs or the production was in

Kansas. The Court ruled as a matter of constitutionally com-

pelled choice of law that the Kansas court did not have suffi-

cient contacts with nonresident class members owning prop-

erties outside Kansas to permit the Kansas court to apply

substantive Kansas law setting interest rates. 872 U.S. at 822.

In Sun Oil Co. v. Wortman, 486 U.S. 717 (1988), an in-

terest-on-royalty case factually similar to Shutts, the Court

held that it was permissible for Kansas to choose forum law

to apply its five year statute of limitations to nonresident

class members because the statue of limitations is procedural,

not substantive. The Court acknowledged that the “substan-

tive-procedural dichotomy in the context of the Full Faith

and Credit Clause” functions simply “to delimit spheres of

state legislative competence.” Id. at 727 (emphasis added).

In its most recent choice-of-law decision, Franchise Tax

Board of California v. Hyatt, 538 U.S. 488 (2003), the Court

affirmed that the Full Faith and Credit Clause did not compel

Nevada to substitute the statutes of another State for its own

statutes dealing with a subject matter concerning which Ne-

vada was competent to legislate. Nevada’s competence to

legislate arose from the fact that the alleged tortious activity

occurred in Nevada.

The crux of the Shutts holding has thus been reinforced

by these two later cases. The forum in a multistate class ac-

ree rt eee

5

tion cannot apply substantive forum law to nonresident class

plaintiffs who have no connection with the forum State be-

cause the forum State Jacks competence to legislate substan-

tive law for those nonresidents.

Oklahoma is not competent to legislate about tax refunds

for other States’ residents on transactions occurring in those

States. Under Shutts, Wortman and Hyatt, the due process

and full faith and credit clauses require Oklahoma to apply

the substantive law of the other States. A State has no more

“substantive” provision of law than its statutory assertions of

its sovereign immunity to specify tax administration remedies

and to bar suits in court by taxpayers who have not exhausted

those remedies. Oklahoma may not include plaintiffs from

those States as part of the certified class.

B. Assertions of State Sovereign Immunity to Bar

Taxpayers from Suing Vendors Regarding Tax

Collections or from Bringing Court Actions for

Tax Refunds Prior to Exhausting Administrative

Remedies is Vital to Protect State Tax Policy.

Class plaintiffs are suing AT&T to obtain the return of er-

roneously collected municipal taxes as damages in an action

for restitution and breach of contract. AT&T had duly paid

the tax over to the tax agencies. The Oklahoma Court of Civil

Appeals described the action as one that “concerns the valid-

ity of a municipal sales tax charge included in their monthly

long distance bill.” Appendix to Petition (App.) at 2a.

In their motion to certify the class, however, named

plaintiffs argued that this is not a tax refund case implicating

refund procedures. Even though AT&T wrongly collected a

tax that was not owed and plaintiffs want that tax refunded,

plaintiffs focus on AT&T’s error. The trial court found, and

the appellate court affirmed, that this was not a tax refund

action under Oklahoma law. Plaintiffs’ failure, therefore, to

6

exhaust the administrative tax proceedings did not deprive

the trial court of subject matter jurisdiction.

Other States whose residents were certified as part of the

class would treat this lawsuit as a tax refund action. States

like New York, Texas, Pennsylvania, Florida, and others

cited in the Petition at 18-21 require that any claim that im-

plicates a tax refund must be brought against the State—not

the business that collects and pays over the tax—and must be

brought first to the administrative forum or special court es-

tablished as a statutory condition for the waiver of sovereign

immunity for any subsequent tax refund suit in a court of

general jurisdiction.

States require exhaustion of administrative remedies and

bar suits against vendors for a number of reasons. Of primary

importance is the ability of States to safeguard their fisc.

Taxes are the crucial lifeblood of any government. This

Court, in a distinguished line of cases thoroughly rehearsed

in the Petition at 12-14, has repeatedly affirmed the impor-

tance of state taxes as an essential element of state sover-

eignty and the firm policy against interference with state tax

procedures.

Those procedures enhance administrative efficiency. Mil-

lions of refunds are sought annually. An administrative fo-

rum acts as a filtering mechanism to dispose of the great bulk

of tax refunds, protecting the court system from needless liti-

gation. These specialized administrative forums are familiar

with the intricacies of tax laws and can bring well-developed

expertise to bear on this complex and vital subject in an effi-

cient and expeditious manner.

Using administrative refund procedures remains impor-

tant even where consumers are complaining about a vendor’s

failure to figure the tax correctly—whether though inatten-

tion, unwillingness to fund the necessary resources, or even

7

outright fraud. For as long as plaintiffs are challenging “the

validity of a municipal sales tax charge,” as the Oklahoma

court described the action here, and are seeking a refund, the

State has a crucial interest in ensuring it tax agency is party

to the dispute and normal tax remedies are followed to de-

termine whether the tax was collected erroneously.

Insulating vendors from the burden of litigation over re-

funds furthers an efficient tax system. The States already im-

pose on the vendor the burden of collecting and paying over

the government’s taxes. To better ensure their wholehearted

cooperation, States have reasonably chosen to protect their

vendor from being caught in the middle of disputes between

consumers and the State over whether a tax is properly due.

The Oklahoma court did not “misconstrue” the laws of

these other States.’ It affirmatively acknowledged that prece-

dent from several States would treat this action as a claim for

a tax refund, would bar taxpayers from bringing suit against a

vendor-collector rather than the tax agency, and would re-

quire exhaustion of administrative remedies prior to court

action. “Some jurisdictions have addressed the alleged over-

charge of sales tax by companies providing telephone service

and held that administrative remedies must first be exhausted

before judicial relief can be sought.” App. at 4a-5a.

The Oklahoma court simply disregarded the policy inter-

ests and statutory mandates of these other States. Instead of

excluding residents of those States from the certified plaintiff

class or denying class certification due to a lack of common-

4 See Wortman, 486 U.S. at 730-31 (“To constitute a violation of the

Full Faith and Credit Clause or the Due Process Clause, it is not enough

that a state court misconstrue the law of another State. Rather, our cases

make plain that the misconstruction must contradict law of the other State

that is clearly established and that has been brought to the court's atten-

tion.”)

8

ality, the court denied any conflict of !aws existed. It focused

exclusively and narrowly on the similarity in state tax laws

under which a city tax can never apply to residents or trans-

actions outside city limits. App. at 11a and fn. 6. The court

ignored altogether the larger and more important jurisdic-

tional aspect of the tax laws of sister States that ensures the

efficient running of their state tax systems and protects their

fisc through required exhaustion of administrative remedies.

In affirming certification of a plaintiff class that includes

residents of these other States, the Oklahoma court exceeded

due process and full faith and credit limits on Oklahoma's

competence to legislate for nonresident class members. It

improperly disregarded the law of the other States, impairing

their sovereign right to govern their own tax processes. This

Court is the only shield available to these other States.

II

THIS COURT HAS JURISDICTION UNDER

THE EXCEPTIONS TO FINALITY IN COX

BROADCASTING CO. V. COHN, 420 U.S. 469

(1988), AND STANDARDS FOR APPEAL OF

CLASS CERTIFICATION DECISIONS DEVEL-

OPED UNDER FED. R. CIV. P. 23(f).

Since 1789 Congress has granted the Court jurisdiction to

review state court litigation only after the highest state court

had rendered a final judgment or decree. 28 U.S.C. 1257.

In Cox Broadcasting Co. v. Cohn, 420 U.S. 469 (1975), the

Court collated into four categories various exceptions to that

finality requirement. Jurisdiction to grant this interlocutory

review is provided under three of the four categories.

“In the first category are those cases in which there are

further proceedings—even entire trials—yet to occur in the

state courts but where for one reason or another . . . the out-

9

come of further proceedings [is] preordained.” Jd. at 479. As

in Mills v. Alabama, 384 U.S. 214 (1966) (only defense to

proscribed publication was First Amendment claim), the out-

come here is preordained. AT&T has acknowledged charging

municipal tax to customers living outside city limits. The

Oklahoma court underlined the obvious point that municipal-

ity cannot tax transactions that occur outside the municipal-

ity. There is no question but the plaintiffs are entitled to a

refund. The jurisdictional question implicated by the correct

application of federal choice-of-law restraints under due

process and full faith and credit—which requires Oklahoma

to respect the exhaustion requirements of sister States—will

persist regardless of sending the case back for trial.

Indeed, that persistence is the core of Cox’s second cate-

gory “in which the federal issue, finally decided by the high-

est court in the State, will survive and require decision re-

gardless of the outcome of future state-court proceedings.”

420 U.S. at 480. The Oklahoma court looked at the different

laws of sister States and decided to ignore them. That deci-

sion has been affirmed by the Oklahoma Court of Civil Ap-

peals and let stand by the Oklahoma Supreme Court. There is

no basis to believe that the Oklahoma courts will suddenly

change their minds about the law applicable to class certifica-

tion. The error in class certification results entirely from

faulty legal analysis, not a complex factual calculus. Because

AT&T acknowledges the factual error in charging customers

. a tax it should not have, the outcome of future state court

proceedings will not alter the need for this Court to decide

this jurisdictional issue in the class certification.

Lastly, this case most clearly qualifies as an exception to

the finality requirement under the fourth category “where re-

versal of the state court on the federal issue would be preclu-

sive of any further litigation on the relevant cause of action.”

10

420 U.S. at 482-83.° Shutts compels Oklahoma to apply the

law of sister States to nonresident class plaintiffs. The rele-

vant cause of action under the law of sister States is a tax re-

fund action. The statutory invocation of sister States’ sover-

eign immunity to require protection for vendors and exhaus-

tion of administrative remedies is preclusive of any further

litigation on that relevant cause of action for residents of

those States.

The Court in Cox cited Construction Laborers v. Curry,

371 U.S. 542 (1963), as an exemplar of the fourth category.

In Curry, federal labor policy preempted state jurisdiction to

hear a picketing case properly before the National Labor Re-

lations Board. As the Court in Cox articulated, the interlocu-

tory appeal in Curry was proper because

the power of the state court to proceed in the face

of the preemption claim was deemed an issue

separable from the merits and ripe for review in

this Court, particularly “when postponing review

would seriously erode the national labor policy

requiring the subject matter of respondent’s cause

to be heard by the Board, not by the state courts.”

420 U.S. at 483, quoting Curry, 371 U.S. at 550. The same

reasoning applies here. Federal policy safeguards the exclu-

sivity of jurisdiction for State tax administrative proceedings.

That policy derives from principles of federalism and comity

under the Constitution and has been reinforced by Congress

in the Tax Injunction Act and this Court in cases like Na-

tional Private Truck Council, Inc, v. Oklahoma Tax Commis-

5 The third category in Cox, inapplicable here, concerns cases where

the federal issue has been finally decided, but “later review of the federal

issue cannot be had, whatever the ultimate outcome of the case.” Id at 481

11

sion, 515 U.S. 582 (1995): To paraphrase Curry: “postponing

review would seriously erode the national [federalism] policy

requiring the subject matter of respondent’s cause to be heard

[in the other States’ tax administrative forums], not by the

[Oklahoma] state courts.”

This case is also strikingly similar to another fourth cate-

gory case cited in Cox. In Mercantile National Bank v. Lang-

deau, 371 U.S. 555 (1963), the banks asserted that “a special

federal venue statute immunized them from suit in Travis

County and they could be sued only in another county.” 420

U.S. at 483. Here, required exhaustion of other States’ tax

administrative procedures immunize AT&T and tax agencies

from suit in courts. The issue of other States’ sovereignty,

like the issue in Langdeau, may be “entertained as a ‘separate

and independent matter, anterior to the merits, not enmeshed

in the factual and legal issues comprising the plaintiff cause

of action.”” 420 U.S. at 483-84, quoting Langdeau, 371 U.S.

at 558.

Jurisdiction of this Court to review the Oklahoma court

decision plainly fits within the exceptions to finality in Cox.

Further persuasive reason to hear this case comes from de-

veloping standards for discretionary appeals from class certi-

fication decisions by federal district courts.

In Amchem Products, Inc. v. Windsor, 521 U.S. 591

(1997), the Court granted certiorari and reviewed an inter-

locutory appeal of class certification. That action sought a

global settlement of current and future asbestos related

claims. The Court agreed that “because [resolution of class

certification issues] here is logically antecedent to the exis-

tence of any Article III issues, it is appropriate to reach them

first.” Id. at 612. The Article III issues—standing, subject

matter jurisdiction, and justiciability—were jurisdictional,

and yet the Court dealt first with class certification.

12

Here, the jurisdictional issue—the lack of subject matter

jurisdiction over tax issues arising in States that require ex-

haustion—coincides with the class certification issue and has

long enjoyed the assiduous respect of this Court. Interlocu-

tory review is similarly appropriate here.

The dissent in Amchem objected to the interlocutory reso-

lution of the class certification issue because such “highly

fact based, complex, and difficult matters [were] inappropri-

ate for initial review before this Court.” Jd. at 630. No such

potential obstacle exists here. The bar to class certification is

neither complex nor fact-based. It derives from a straightfor-

ward analysis of the tax and sovereign immunity statutes of

the other States. Named plaintiffs are obliged to present ex-

actly that information to the court on their motion to certify

the class. Castano v. American Tobacco Co., 84 F.3d 734,

741 5" Cir. 1996); Walsh v. Ford Motor Co., 807 F.2d 1000,

1016 (D.C. Cir. 1986).

A spate of recent opinions from U.S. Courts of Appeals®

has developed standards for when an interlocutory appeal of

a class certification is prudent under the newly-minted au-

thority of FED. R. Civ. P. 23(f).’ This building exegesis is

° Blair v. Equifax Check Services, Inc., 181 F.3d 832 (7th Cir. 1999);

Waste Management Holdings, Inc. v. Mowbray, 208 F.3d 288 (1st Cir.

2000); Prado-Steiman v. Bush, 221 F.3d 1266 (11th Cir. 2000); Newton

v. Merrill Lynch, Pierce, Fenner & Smith, 259 F.3d 154 (3d Cir. 2001);

Lienhart v. Dryvit Systems, Inc., 255 F.3d 138 (4th Cir. 2001); In re

Lorazepam & Clorazepate Antitrust Litigation, 289 F.3d 98 (D.C. Cir.

2002).

7 Fep. R. Civ. P. 23(f) reads as follows: “A court of appeals may in its

discretion permit an appeal from an order of a district court granting or

denying class action certification under this rule if application is made to

it within ten days after entry of the order. An appeal does not stay pro-

ceedings in the district court unless the district judge or the court of ap-

peals so orders.”

13

pertinent to the Court’s decision whether to grant certiorari.

Indeed, several of the decisions quoted the Advisory Com-

mittee’s comment that the standard for entertaining an appeal

under Rule 23(f) is "akin to the discretion exercised by the

Supreme Court in acting on a petition for certiorari." Blair,

181 F.3d at 833; Prado-Steinman, 221 F.3d at 1272.

The circuit courts have identified two basic categories

where an interlocutory appeal is appropriate. First are the so-

called “death-knell” situations where the certification deci-

sion will end the litigation either because a named plaintiff

denied class certification has too little at stake to proceed, or

a defendant facing a large certified class will be forced to set-

tle. The second category focuses on the nature of the issues

raised and suggests five factors that weigh toward appeal:

(1) unsettled and fundamental issues of law relating to class

actions; (2) issues likely to evade end-of-the-case review;

(3) a class certification decision that is manifestly erroneous;

(4) a case that involves the public interest or a governmental

entity; or (5) when similar issues are arising in related ac-

tions. Lorazepam, 289 F.3d at 104-105. All five factors favor

granting review here.

The Petition for Certiorari involves a fundamental and

unsettled issue concerning the impact of federalism, state

sovereignty, and state tax policy on class certification deci-

sions. This Court has repeatedly affirmed that state tax sys-

tems are an essential attribute of state sovereignty and that

noninterference in state tax administration procedures is criti-

cally important. The application of the constitutional choice-

of-law ruling in Shutts implicates a fundamental assertion of

state sovereign immunity with regard to state tax policy. This

Court represents the only protection for States against

Oklahoma’s violation of these crucial sovereignty interests.

14

End-of-case review is inadequate to protect the interests

of the States. Allowing Oklahoma to proceed with plaintiffs

from States which reserve initial jurisdiction on tax matters

exclusively to an administrative process would, itself, deny

state sovereignty interests for the vindication of which review

is sought. See Helstoski v. Meanor, 442 U.S. 500, 506-07

(1979) (Speech and Debate Clause); Abney v. United States,

431 U.S. 651, 662 (1977) (double jeopardy).

A number of courts have placed special weight on the

third factor, suggesting “this factor should be viewed on a

sliding scale. The stronger the showing of an abuse of discre-

tion, the more this factor weighs in favor of interlocutory re-

view.”® Indeed, that view echoes this Court’s response to the

dissent’s assertion in Amchem that the many complex issues

counseled delay in reviewing class certification. “If certifica-

tion issues were genuinely in doubt, however, the jurisdic-

tional issues would loom larger.” 521 U.S. at 613, n. 15.

Rarely does an avid appellant doubt a lower court’s deci-

sion was manifestly erroneous. But the error below looms

particular large here given the clarity of the choice-of-law

standard laid down by this Court in Shutts and the blithe will-

ingness of the Oklahoma Court of Civil Appeals to cite and

ignore the laws of those sister States that require exhaustion

of administrative remedies and bar suits against vendors.

This manifest error alone justifies granting certiorari.

The fact and nature of the governmental interest impli-

cated here, the fourth factor, completely escaped the Okla-

homa courts. While Oklahoma may not regard this suit as

8 Prado-Steiman, 221 F.3d at 1274-75 & n. 10; see also Lienhart,

255 F.3d at 145-46; Newton, 259 F.3d at 165; Lorazepam, 289 F.3d at

105 (“the more questionable the district court's decision, the less the re-

maining four factors need weigh in.”)

15

one against the sovereignty interests of the State, a number of

her sister States do.

Finally, similar issues are arising in related actions. Re-

cently, the Illinois Court of Appeals affirmed a class certifi-

cation including residents of Illinois and 17 other States in an

action against a telephone company for erroneously collect-

ing municipal sales tax from residents outside city limits.

P.J.’s Concrete Pumping Service v. Nextel West, No. 2-02-

1219 (Ill. Ct. App. 2™ Div., Jan. 27, 2004). The Illinois court

likewise ignored the choice-of-law rules that required it to

consider the law of its sister States in certifying the class to

include nonresident defendants with no aggregation of con-

tacts with Illinois—law that bars exactly that kind of suit.

Review by this Court at this stage is not only fully within

the Court’s jurisdiction and within prudential criteria favor-

ing early review of certain class certification decisions, but it

offers the only source of protection for state sovereignty in-

terests.

CONCLUSION

The petition for certiorari should be granted.

Respectfully submitted,

Frank D. Katz, General Counsel

Counsel of Record

MULTISTATE TAX COMMISSION

444 No. Capitol Street, N.W., #425

Washington, D.C. 20001

(202) 624-8699

March 24, 2004